A Latin American Success Story: the Microfinance Growth Fund
A decade ago, Latin American countries were struggling to recover from the aftermaths of the 2008 global financial crisis. They were facing liquidity constraints, a decline in cross-border trade, a decrease in commodity prices, a decline in foreign direct investments, and a downturn in demand and capital from major world economies. This in turn caused a decline in industrial production, a rise in unemployment, and a fall in local demand. Against this backdrop, the US President Barack Obama called for “a new Microfinance Growth Fund for the hemisphere that can restart the lending that can power businesses and entrepreneurs in each and every country that’s represented here” at the Fifth Summit of the Americas in April 2009.
With the help of investors such as the Multilateral Investment Fund (MIF), IDB Invest (members of the Inter-American Development Bank, IDB Group), US-based Overseas Private Investment Corporation (OPIC), Citibanamex, CAF Development Bank of Latin America, Norwegian Microfinance Initiative, Accion International, as well as other private sector investors, the call could be answered in March 2010. The Microfinance Growth Fund (MiGroF) was created to help support the provision of microfinance services in Latin America and the Caribbean via debt financing. BlueOrchard was selected as the fund manager out of 17 applicants bidding for this mandate. Today, almost ten years later, MiGroF reached its maturity and has not only accomplished its task but even exceeded its original objectives.
MiGroF: 7 years of impact in Latin and Central America
MiGroF started operations in September 2010. The Fund’s key objectives were to lend medium and long-term sources of finance to microfinance institutions (MFIs) to help them rebuild their capacity to lend after the 2008 financial crisis and to increase the supply of finance for micro, small and medium sized businesses in the Latin and Central American region.
MiGroF provided debt financing to MFIs in both hard and local currencies and financed in total 43 MFIs across 13 countries. The Fund invested mainly in middle- and lower-middle-income countries. Almost 30% of its assets were invested in Tier II and Tier III institutions and supported hereby particularly small and medium sized MFIs to grow sustainably. By the end of its lifetime, MiGroF had disbursed more than USD 300 million and financed over 400,000 micro-entrepreneurs – mostly female and rural clients. These results clearly show that MiGroF largely contributed to a rise in supply of finance in the Latin America and Caribbean region during 2010-2017.
From the beginning, MiGroF received strong backing from leading global development actors, building and strengthening the Fund’s renowned reputation. MiGroF was an impressive experience to all stakeholders as it managed to achieve both, very good social and financial returns. The Fund was able to successfully fulfil its objective to reach several thousands of micro entrepreneurs from Mexico to Argentina. In times of crisis, MiGroF provided many Latin and Central Americans access to financial means, enabling them to succeed in their businesses and improve the quality of their lives. In our view, this was the most rewarding aspect of the Fund.